Annual Report 2014 - ASL Aviation · PDF fileASL AVIATION GROUP LIMITED SHAPING THE FUTURE OF AVIATION ANNUAL REPORT SAFETY PEOPLE RELIABILITY QUALITY PROFITABILITY. SHAPING THE FUTURE

ASL AVIATION GROUP LIMITED

SHAPING THE FUTURE OF AVIATION

ANNUAL REPORT

SAFETY QUALITYRELIABILITY PROFITABILITYPEOPLE

SHAPING THE FUTURE OF AVIATIONWe are a dynamic global aviation group, headquartered in Dublin, Ireland and with operations on five continents.

With various leasing entities and trading companies, including 7 airlines, we offer our customers worldwide an exceptional range of aviation services. We fly passenger and cargo operations under our own brands and for major express integrator and leading brand airline customers. In addition we also offer aircraft leasing and a number of airline support services from customised maintenance to parts support and pilot training.

We are truly impartial and dedicated to each individual customer, and our wide breadth of quality services assist us in achieving our mission to be an extension of our customers and to be ‘the’ neutral service provider of choice.

CONTENTS

CHAIRMAN’S OVERVIEW 3 Report of the Chairman OPERATIONAL AND FINANCIAL HIGHLIGHTS 6 Financial Highlights 7 Highlights for 2014 10 Report of the Executive GOVERNANCE STATEMENTS AND STRUCTURE 14 Corporate Governance 15 Corporate Social Responsibility 19 Group Ownership 19 Organisation OTHER INFORMATION 20 History of the ASL Aviation Group 24 Fleet summary of owned aircraft

V A R I O U S L E A S I N G E N T I T I E S

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REPORT OF THE

CHAIRMAN

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T R A D I N G R E S U LT S A N D F I N A N C I A L S T R E N G T HI’m pleased to report that not only has the ASL Aviation Group produced another strong result for the year but it has also concluded the acquisition of the Farnair Group. The acquisition of Farnair will continue to supplement and grow ASL’s capability not only in Europe but also on a global scale and more importantly enhance the service proposition to both our existing and new customer base.

The profit for the period of €17.1m is in line with 2013 and continues to show a strong level of resilience and evolution in an industry which has endured a turbulent year.

The Group continues to trade successfully and profitably in all areas of operation. The cargo operations remain the backbone of the ASL Group. Flying for all of the top integrators, supporting the aid and relief market throughout Africa and operating a successful ad hoc market for one-off speciality transport requirements, ASL continues to strive and demand the highest quality of service levels which will ensure the Group’s position at the forefront of the industry. The acquisition of Farnair allows the consolidation of the Group’s existing European cargo operations and also provides an opportunity to grow and develop the operation on a more global scale.

The passenger operations of the Group continued to expand during the year. Most notable was the commencement of FlySafair in South Africa, a low cost carrier in which the Group has a 25% interest. Following its initial launch in October, the business continues to grow and develop and provides a truly exciting opportunity for the Group going forward. In addition, ASL commenced transatlantic operations on behalf of Aer Lingus which was also a significant development and one which the Group remains extremely proud to be part of.

The leasing activities of the ASL Group continue to play an important role in supporting the Group airlines but also continues to contribute to the profitability through external leasing activities. The Group reported strong results in the aircraft trading activities which supports ASL’s already proven valuation and planning methodologies.

S T R A T E G YThe continued consolidation of the cargo market in addition to the somewhat limited growth in Europe has led the Group to develop exciting opportunities outside of the region. The development of the passenger activities also represents an exciting move for ASL which will underpin the ability to adapt and grow with its customers. The leasing business has been and continues to be an important activity for the Group. We continue to actively seek out opportunities in this regard.

O U T L O O K2014 saw the ASL Group make a number of important strides forward in line with its development plan. The continued support of an already strong and varied customer base along with the continued growth and evolution of ASL provides exciting opportunities not only for 2015 but also for the years ahead.

F I N A L LYI would finally like to recognise the excellent enthusiasm and hard work of the management and employees of the ASL Aviation Group throughout the year. On behalf of the board, I would like to express our appreciation for all the success achieved throughout the year and look forward to continued success in 2015.

Ludwig Criel Chairman

REPORT OF THE

CHAIRMANLUDWIG CRIEL

CHAIRMAN

ASL AVIATION GROUP LIMITED Annual Report 2014

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SAFE

TY

2014

€’000’s

% change 2013 €’000’s

2012 €’000’s

Revenue 331,672 2.8% 322,760 380,037

EBITDA 56,517 -2.2% 57,798 76,964

EBIT 23,747 -10.0% 26,400 44,334

Net Profit 17,138 0.7% 17,018 27,077

Total Assets 473,833 28.2% 369,481 411,805

Total Equity 189,582 21.5% 155,987 146,751

€56.5mEBITDA

6.6%PRE TAX MARGIN

9.9%AFTER TAX RETURN

ON EQUITY

€331.7mREVENUE

2014 2013 2012

Number of hours flown 73,248 58,036 64,346

Passengers Carried 1,297,569 754,750 693,000

Reliability 99.7% 98.5% 99.4%

FINANCIAL HIGHLIGHTS

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HIGHLIGHTS FOR 2014GROWTH The acquisition of the Farnair Group was completed in December,

bringing the total number of Airline Operator’s Certificates (AOC’s) in ASL to 7. The combined fleet grew to over 90 aircraft and total employee numbers increased to 1500.

PEOPLE ASL’s core values are at the heart of everything that is done and achieved throughout the Group, and this year ‘People’ became our new core value, joining Safety, Reliability, Quality and Profitability. The new value recognises the key role played by our people throughout the Group.

AER LINGUS Transatlantic passenger operations started for Aer Lingus with 3 initial routes between Shannon and New York and Boston and between Dublin and Toronto. The first Aer Lingus early morning Dublin-New York JFK rotation was launched subsequently facilitating a day-return option on the route.

BOEING 757’s In February Air Contractors operated a B757 ETOPS 180 flight, gaining certification from the Irish Aviation Authority (IAA). With the addition of the B757 fleet, the airline carried over 100,000 passengers in the month of August. In September the IAA and Air Contractors successfully completed the 12th and final ‘review gate’ of the B757 Accelerated ETOPS process.

FLYSAFAIR After long regulatory delays FlySafair was granted its commercial licence and the new airline, South Africa’s first ‘True’ low cost carrier launched ticket sales in late July. By the time the first flight took off in mid-October almost 150,000 tickets had been sold. FlySafair serves Capetown, Johannesburg, Port Elizabeth and George.

NOVA SCOTIA Europe Airpost added to its passenger operations with the introduction of scheduled routes between France and Portugal. The airline also launched its first transatlantic service, serving both Glasgow, Scotland and Halifax, Nova Scotia in Canada from Paris CDG. The Boeing 737-700 service connected with flights to the French dependant territory of Saint Pierre and Miquelon.

HERCULES Another busy year saw the Hercules fleet flying constantly for the United Nations, the World Food Programme and the International Committee of the Red Cross. The Hercs also completed a programme of flights to Antarctica.

FARNBOROUGH At the renowned airshow ASL signed a Letter of Intent (LOI) to purchase up to 10 new Lockheed LM100J ‘Super Hercules’ aircraft. Safair is currently the largest commercial worldwide operator of the civilian Hercules and ASL demonstrated its commitment to the unique operations of the aircraft with this LOI for the new civilian version to be launched in the coming years.

TECHNICS In Scotland ACE transferred operations to its new 14,500sq/ft. EASA Part 145 facility and rebranded to become ACLAS Technics, reflecting its new business focus. In July the facility, now specialising in aircraft component repair, was granted United States FAA Repair Station approval.

SHANNON Air Contractors opened a new hangar on the East Apron in Shannon Airport to cater for both ATR and Boeing 757 line maintenance up to ‘A’ checks. The airline has had a presence in Shannon since 2004.

SINGAPORE In an initiative driven by ATR’s rapid growth with Asian operators ACLAS Global opened a new warehousing hub at Changi Airport in Singapore. The hub stores a wide range of rotable, consumables and de-ice product types allowing the company to offer customers throughout Asia-Pacific a significantly faster return to flying for AOG (Aircraft on Ground) aircraft.

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8 PEOP

LE

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PEOP

LE

The Farnair Group is based in Basel, Switzerland with current operations predominantly European integrator based. The Group also has trading platforms established in both India and Thailand. The Farnair Group owns 19 aircraft (15 ATRs, 3 Boeing 737-400 freighters and 1 Beech 1900D) and employs 300 employees worldwide. The acquisition allows ASL consolidate its current European operations in line with its current growth strategy and also provides significant opportunities for further growth and expansion outside of the region.

A I R L I N E SEurope Airpost saw a slight decrease in the total numbers of hours flown in the year, however, this was offset more importantly by an overall increase in reliability to 99.7%. Passenger numbers also increased 18% which is in line with the company strategy as it continues to diversify revenue streams with further scheduled and non-scheduled passenger operations. Two Boeing 737-700s were added to the fleet bringing the total of this fleet type to four. The additional aircraft provide flexibility to our operations allowing the company increase scale and take advantage of other opportunities in the market.

The company continues to have a close partnership with La Poste as well as the other postal integrators which culminated in the renewing of a number of contracts during the year. The B737-300QC were and will remain an important driver of the business. However, in line with customers’ requirements and the need to meet the additional opportunities in the market, one of the aircraft underwent full freighter conversion during the year with a further one in progress at year end. This will also facilitate greater versatility and interchangeability of aircraft across the Group.

Air Contractors continues to successfully grow in line with market trends while maintaining the ATR cargo operations as its core activity. In addition to the A300-600 operations in the Middle East, the gradual introduction of the B737-400 aircraft continues to supplement our existing cargo operations and further enhances the company’s product offering in the cargo sector.

Similarly to Europe Airpost, the company continues to supplement its revenue streams. The company operates transatlantic passenger operations for Aer Lingus with three B757-200 aircraft and also operated two B737-400 aircraft

for Ryanair during the summer months. The year also saw the company provide contract passenger operations for an African operator using A320s all of which demonstrates the company’s ability to capitalise on opportunities regardless of fleet type.

Significant improvements were made across most fleet types on reliability during the year. This is a core requirement of our operating model and will continue to be the main factor in how the company is perceived by its customers.

The Group’s associated airline in South Africa, Safair, continues to trade well with the Hercules fleet generating a strong contribution on the back of a buoyant aid and relief market mainly across Africa. Utilisation of the aircraft remains high as demand for the aircraft type is close to record levels. In addition, the commencement of FlySafair in Q4 2014, adds a further facet to the company’s operations. Load factors continue to be ahead of expectations with a strong 2015 expected as the market continues to bed down.

F L E E T The year saw a decrease in the number of aircraft as five ATRs were disposed of and one B737-400 was sold to its insurance company following a constructive total loss. The net profit generated from the disposals totalled €5.8m. Two additional B737-400 (passenger configuration) were purchased during the year which are in operation in FlySafair. The size and mix of fleet types across the Group allows significant flexibility and also ensures the ability to buy and sell aircraft when opportunities arise.

C O N C L U S I O N2014 has seen the Group evolve in line with both its strategic plan and the changing market. Importantly both have been achieved in line with overall Group profitability expectations. The Group remains at the forefront of the European cargo market, a position which was further accentuated by the acquisition of the Farnair Group. The acquisition also provides global opportunities with both the Indian and South East Asian platforms. Significant strides were made to grow and diversify the Group’s other revenue streams which when combined with the consolidation of the cargo market should see the Group produce another strong performance in 2015.

Hugh Flynn CEO

REPORT OF THE

EXECUTIVE

10

ASL produced a profit of €17.1m (2013: €17.0m) for the year which

demonstrates the Group’s resilience in a somewhat difficult trading

environment. The Group also completed the acquisition of the

Farnair Group in December which complements the existing cargo

operations and further consolidates the Group’s position in the European

cargo market.

EUROPE AIRPOST 2014 2013 2012

NUMBER OF HOURS 27,750 28,750 33,223

NUMBER OF HOURS CARGO 8,523 12,400 15,645

TONNES OF CARGO CARRIED 46,362 52,971 75,660

NUMBER OF PASSENGER HOURS 19,227 16,350 17,578

NUMBER OF PASSENGERS CARRIED 763,930 639,272 597,039

CARGO RELIABILITY 99.70% 98.56% 99.06%

AIR CONTRACTORS IRELAND 2014 2013

Number of aircraft

Number of hours

Reliability

Number of aircraft

Number of hours

Reliability

ATR 42 6 6,120 99.80% 6 5,412 98.50%

ATR 72 11 9,723 99.74% 11 10,263 98.60%

A300 2 2,573 98.45% 3 3,484 96.80%

B737 4 6,623 98.33% 4 5,275 95.80%

B757 3 10,852 99.94% - - -

SAFAIR 2014 2013 2012

NUMBER OF HOURS FLOWN 8,152 4,582 6,497



*Safair Operations is a 25% associate

2014 2013 2012

NUMBER OF HOURS FLOWN 73,248 58,036 64,346

PASSENGERS CARRIED 1,297,569 754,750 693,000


RELIABILITY 99.7% 98.5% 99.4%

FARNAIR GROUP 2014

NUMBER OF HOURS 16,927

NUMBER OF HOURS CARGO 15,934

TONNES OF CARGO CARRIED 35,216

NUMBER OF HOURS PASSENGERS 993

NUMBER OF PASSENGERS CARRIED 8,575

RELIABILITY 99.20%

*The Farnair Group was acquired on 4 December 2014. The above figures are for the 12 month period to December 2014.

AIR CONTRACTORS IRELAND 2014 2013 2012




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12R E L IAB I L I T Y

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R E L IAB I L I T Y

C O R P O R A T E G O V E R N A N C E S T A T E M E N TThe ASL Aviation Group is committed to risk management practices that assist the directors in the carrying out of their responsibilities.

B O A R D O F D I R E C T O R SThe board is currently composed of six members and two nominated alternates. This includes one executive member and the remaining directors are representatives of the shareholders or are included by special invitation.

The Board of Directors is assisted by two special advisory board committees, an Audit Committee and a Remuneration Committee.

A U D I T C O M M I T T E ECurrently the Audit Committee consists of four executive directors of the subsidiary companies and two directors of ASL.

In 2014, the Audit Committee assisted the board of directors in order to achieve its supervision and monitoring responsibilities in the broadest sense. The audit committee meets several times a year to assess the results and financial position of the Group, the valuation of its aircraft fleet and to review the audit process and findings. The Group has retained the services of an external accounting firm which reviews and reports on internal audit matters referred to it by the Audit Committee as and when required.

Following each meeting the Chairman of the Audit Committee reports back to the Board of Directors.

R E M U N E R A T I O N C O M M I T T E E The Remuneration Committee currently consists of three directors of the ASL Group. The committee meets as required during the year to review and approve remuneration matters and the incentive plans of the executives and employees and to determine remuneration of the non-executive directors.

Following each meeting the Chairman of the Remuneration Committee reports back to the Board of Directors.

A S L E X E C U T I V E C O M M I T T E EThe Chief Executive of ASL, Mr Hugh Flynn, is the Chairman of the Executive Committee which consists of key directors from the subsidiary companies. This committee meets every two weeks to consider the day-to day activities of the companies, manage the aircraft fleet and agree on actions to implement the strategic direction of the Group.

F L I G H T S A F E T Y C O M M I T T E E

During 2014, the Group continued to develop the activities of a Flight Safety Committee with the objective of providing oversight and co-ordination of the flight safety practices of the respective airlines. The group is composed of key personnel involved in managing the day-to-day risks of operating aircraft. By sharing best practice methodology, the Group can maximise its commitment to maintaining safety.

R I S K S A N D U N C E R T A I N T I E SIn the course of its normal business the Group is exposed to risks and uncertainties. These can be summarised in three categories:

S t r a t e g i c r i s k s : Macro-economic environment, financial circumstances, the Group’s reputation, political and legal developments.

O p e r a t i o n a l r i s k s : Changes in the market conditions, counterparty credit risk, relationship with business partners, human resources, IT-infrastructure, safety of assets and data.

F i n a n c i a l r i s k s : Cash management, taxes, forecasts and budgets, correct and timely reporting, compliance with accounting rules, interest rate and exchange rate fluctuations, coverage.

The major and specific risks for each segment are as follows:

A i r c r a f t L e a s i n g significant changes in the value of aircraft. The value

of aircraft is subject to variation arising from changes in aircraft technologies, evolving regulation, fuel prices and market trends;

counterparty risk on the leasing portfolio.

A i r l i n e A c t i v i t y decrease of the demand for passenger charter

activities from travel agents;

reputational issues from negative publicity regarding aircraft related incidents;

risk of disruption of air traffic due to a force majeure event;

concentration of cargo contracts with a small number of customers.

S u p p o r t B u s i n e s s e s changes in the value of spares due to actions

of manufacturers and changes in market conditions.

The Group has risk management processes that include assessment of these changes in risk registers that are used to identify, evaluate and initiate actions to mitigate these risks.

Apart from these specific risks the Group – in the course of its normal activities – is exposed to exchange rate and interest rate risks. The Group uses various financial instruments to cover these risks. This is explained in detail in note 25 of the consolidated accounts.

CORPORATE GOVERNANCE

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S A F E T YThe ASL Aviation Group is fully committed to maintaining and exceeding safety standards. Across the Group, there are various accreditations over and above the required safety standards including ISO 9000 and IOSA accreditations at certain of its airlines to uphold and improve safety standards and ensure compliance with the requirements of the relevant aviation authorities.

E M I S S I O N S A N D N O I S EASL recognises that as a participant in the aviation industry it has a responsibility to minimise emissions. The Group is committed to operating aircraft in the most efficient manner possible and actively engages at all levels to minimise aircraft fuel burn through flight planning and minimising weight. Where possible the Group is modernizing its fleet and replacing older types of aircraft with new more fuel efficient aircraft. The Group’s commitment to more fuel efficient turboprop aircraft through its ATR fleet is further evidence of this strategy.

Since 2013, the European airlines within the Group have been participating in the European Emissions Trading Scheme and by paying for emissions have made a financial contribution in the area. The airlines have successfully completed the mandatory registration and initial steps for participation.

The Group also recognises that in operating into several commercial centres, particularly in Europe, it contributes to noise levels. Pilot training and reduced take off weights contribute towards reducing the amount of noise generated by our aircraft.

E M P L O Y E E T R A I N I N G A N D R E L A T I O N SThe Group invests significant amounts in the training of its personnel, for both front-line aircraft operations and also in its support staff. The Group has further committed to sponsor appropriate external training that contributes towards the development of its people.

The Group has a mixture of both unionised and non-unionised staff across its respective workforces. Common to both arrangements is a highly effective and complementary relationship between management and staff that acts to produce a coherent, aligned and motivated labour force.

The Group also conducts a six monthly “roadshow” at the respective business facilities to update staff on Group strategy, performance and plans.

CORPORATE SOCIAL RESPONSIBILITY


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COMPAGNIE MARITIME BELGE Compagnie Maritime Belge (CMB) is a major Belgian

shipping company based in Antwerp. It was founded in

1895 and its shares are quoted on Euronext Brussels and

are also included in the Next 150 index and the BelMid.

51%

PETERCAM / 3P AIR FREIGHTERS An aircraft leasing company incorporated in Dublin

and is sponsored by Petercam Private Projects (“3P”).

3P is the Private Equity section of Petercam, a leading

Brussels based independent financial group.

GROUP OWNERSHIP

AIRLINES Air Contractors IrelandDublin, Ireland Passenger and cargo

Europe Airpost Paris, France Passenger and cargo

Safair Operations*Johannesburg, South Africa Passenger, cargo and aid and relief* Associate company

(25% ownership through Safair Holdings)

Farnair Switzerland*AllschwilSwitzerlandPassenger and cargo* Joined the Group on

4 December 2014

Farnair Hungary*BudapestHungaryCargo* Joined the Group on

4 December 2014

Quikjet Cargo Airline*BangaloreIndiaCargo* Joined the Group on

4 December 2014. Joint venture (50.93% ownership)

K-Mile*BangkokThailandCargo* Joined the Group on

4 December 2014. Joint venture (45% ownership)

SUPPORT ACLAS TechnicsEdinburgh, United Kingdom Maintenance facility

ACLAS GlobalSouthend-on-Sea, United Kingdom Spares provisioning

Cobiias*AllschwilSwitzerlandAviation related services* Joined the Group on

4 December 2014

Farnair Handling*BudapestHungaryCargo handling services* Joined the Group on

4 December 2014

Farnair Training*Neusiedl am SeeAustriaAviation related services* Joined the Group on

4 December 2014

Farnair Rail - Logistics*Farnair RailWeil am RheinGermanyCargo handling services* Joined the Group on

4 December 2014

LEASING ASL Aviation GroupASL Aircraft InvestmentACL LeasingACL AirSafair Aviation IrelandSafair Lease Finance 72Dublin, Ireland

Safair Lease FinanceJohannesburg, South Africa

OFSB*HamiltonBermuda* Joined the Group on

4 December 2014

Farnair Trading and Leasing*DublinIreland* Joined the Group on

4 December 2014

ORGANISATION

49%


19

1946South African Marine Corporation is formed

1972

1991The French postal airline

L’Aeropostale is formed between La Poste and Air France

2002 The company’s

aircraft fleet dons its new livery

1970

1992

1994

1998

2001Safair establishes its

leasing division Safair Lease Finance (Pty) Ltd.

Safmarine purchase Tropair (Pty) Ltd. and change name to Safair Freighters (Pty) Ltd.

Hunting Group renamed company Hunting Cargo Airlines

Safair Freighters (Pty) Ltd. is renamed Safair (Pty) Ltd.

Purchased by CMB & Safair. Renamed Air Contractors

2000The French La Poste Group

creates its own subsidiary Europe Airpost to transport

its mail freight

Air Bridge Carriers in the United Kingdom was formed

20

2003Set up of the Cabin Crew Division and development of passenger transportation activities

2004

2007

2008

2010

2013Intro of BEE and

ASL now a minority shareholder

of Safair

2014ASL acquires the Farnair Group of

aviation companies

Purchase of BAC Group in Southend UK

Formation of ASL Aviation Group and purchase of Europe Airpost

Purchase of Safair Operations and Safair Lease Finance

Shareholding changed to CMB & 3P Airfreighters/ Petercam

The ASL Aviation Group: A Proud Heritage

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PROF I TAB I L I T Y

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PROF I TAB I L I T Y

F L E E T S U M MARY O F OWN E D A I R C R AF T (AS AT 31 D EC E M B E R 2014 )

TYPE MSN COUNTRY OF REGISTRATION YEAR OF MANUFACTURE CONFIGURATION

BOEING

B737-300 24388 France 1989 Quick change

B737-300 24789 France 1990 Freighter






B737-300 24387 South Africa 1989 Quick change

B737-400 28494 Hungary 1996 Freighter

B737-400 29000 Hungary 1998 Freighter

B737-400 24440 Ireland 1992 Freighter

B737-400 24446 Ireland 1994 Freighter



B737-400 25095 South Africa 1992 Passenger


B737-400* 26065 South Africa 1992 Passenger

B737-400 26961 South Africa 1993 Combi

B737-400 27143 South Africa 1993 Combi

B737-400* 24917 South Africa 1991 Passenger

B737-400 25261 Spain 1992 Freighter

B737-400 28492 Thailand 1996 Freighter






BEECH

Beech 1900 UE-16 Hungary 1992 Freighter

* Airframes owned by Safair Operations

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F L E E T S U M MARY O F OWN E D A I R C R AF T (AS AT 31 D EC E M B E R 2014 )

TYPE MSN COUNTRY OF REGISTRATION YEAR OF MANUFACTURE CONFIGURATION

ATR

ATR 42-300 149 Ireland 1989 Freighter

ATR 42-320 121 Switzerland 1988 Freighter

ATR 42-320 264 Switzerland 1991 Passenger




ATR 72-200 198 Papua New Guinea 1990 Freighter














ATR 72-212 387 Czech Republic 1994 Passenger




HERCULES

L-382 4248 South Africa 1967 Standard






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ASL AVIATION GROUP LIMITED

No. 3 Malahide RoadSwords, Co. DublinIreland

T +353 1 892 8100F +353 1 892 8150 [email protected] www.ASLaviationgroup.com

Documents

Annual Report 2014 - ASL Aviation · PDF fileASL AVIATION GROUP LIMITED SHAPING THE FUTURE OF AVIATION ANNUAL REPORT SAFETY PEOPLE RELIABILITY QUALITY PROFITABILITY. SHAPING THE FUTURE